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The “honor system”: enforcement of bed tax collection can be difficult

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Jefferson, Lewis and St. Lawrence counties all collect “bed tax,” a fee assessed on hotel room rentals. The practice has proven profitable to varying degrees for each county.

But all three counties face a difficult calculus when it comes to enforcing the collection of the fee, which is formally known as occupancy tax.

There are provisions in each county’s law that allows for enforcement measures when hotels fail to pay.

They range from letters of admonition to warrants of seizure, but are effective only when hotel management either neglects or refuses to pay the tax.

When it comes to hotels underreporting or underpaying, the policy becomes much more difficult to enforce.

While treasurers do have the authority to audit the books of the hotels within their county and check them against sales tax figures reported to the state, the practice can prove time-consuming and expensive, according to Lewis County Attorney Richard J. Graham.

In Jefferson County, no audits have been conducted in the last few years.

“Right now it’s the honor system,” County Treasurer Karen M. Christie said.

On the other hand, revenue from the tax has grown so steadily in Jefferson County that it’s hard to imagine anyone is actually failing to pay the tax.

Revenue has gone from $430,000 in 2001 to more than $960,000 in 2012.

But the county has had to issue several warrants in the recent years to force some hotels to pay their share of the occupancy tax, raising some questions about the methods of enforcement.

The county has issued warrants at least 10 times over the last eight years, according to Jefferson County Attorney David J. Paulsen.

Hotels are required to file quarterly bed tax returns with the county treasurer’s office. If they fail to do so, treasurers are authorized to estimate the amount to be paid and send the offending hotels a bill.

If an offending hotel still does not comply, the county attorney can get involved and issue a warrant or send a sheriff’s deputy, who is authorized to collect cash or assets.

“The old raid the till kind of concept,” Mr. Paulsen said.

But when it comes to auditing large hotels to ensure they are not underreporting their occupancy tax collections, the balance gets thrown off a bit.

The cost to a county of auditing such an operation may prove to be more expensive than what the county would be able to recoup in tax collection, both Mr. Paulsen and Mr. Graham said.

The problem would be particularly acute in Jefferson County, which has added several hundred rooms in the last eight years. At the end of 2012, the county had 2,849 rooms in 91 hotels with six or more rooms.

Facilities with six rooms or fewer are exempt from the tax in Jefferson County. They are not exempt in Lewis or St. Lawrence counties. Jefferson and St. Lawrence counties collect 3 percent in occupancy tax per room per night while Lewis County collects 5 percent.

With markets of varying size, all is not equal among the three counties when it comes to occupancy tax collection and enforcement.

“There’s a lot of apples and oranges in this,” Mr. Graham said.

The market of available hotel rooms in Lewis County, for instance, is very small compared with Jefferson and St. Lawrence counties, according to Mr. Graham.

In Lewis County, most accommodations are bed-and-breakfasts, Mr. Graham said.

Likewise, the instances of delinquency seem to be less serious in Lewis County.

“We’ve had to follow up with more than one hotel owner,” Mr. Graham said. “But there’s only been one instance in which we’ve been forced to seek a judgment against a hotel owner.”

The issue is very much a live one in St. Lawrence County, where legislators recently debated potential changes to the enforcement provisions of the law, with some legislators questioning whether hotels are remembering to collect the tax or whether new establishments are even being made aware it exists.

St. Lawrence County Attorney Michael C. Crowe said he could not comment on the issue because of the ongoing debate.

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